Administrative Bloat: What is Your Tuition Money Paying for?

Every Dartmouth student knows that his or her college education is expensive. Families make sacrifices to pay tuition: students and parents take on debt, alumni are constantly solicited for donations, and tax-exempt money flows to colleges rather than to other non-profits. Therefore, it is important to ask if the administration uses the money efficiently. Dartmouth claims to spend $117,000 per student each year to educate us. Less than half of this is covered by tuition. Consider also that full tuition at $60,201 costs about three times more in inflation-adjusted dollars than it did in 1980. If tuition had risen only with inflation, a Dartmouth education would today cost about $25,000 for full tuition plus room and board. One can certainly question if the education and overall experience is three times better today than it was in 1980.

High expenses are not a problem unique to Dartmouth. College tuition nationwide has increased at an average rate of 7.45 percent per year since 1978, and with it the amount of debt with which students are being saddled. The Department of Labor demonstrated that college tuition has experienced the greatest cost increase over the last 30 years, increasing two to three times the overall rate of inflation, significantly outpacing the consumer price index and even medical care.

In “Tuition Rising: Why College Costs So Much”, Ronald Ehrenberg, Professor of Industrial and Labor Relations and Economics at Cornell University argues that top institutions, with long lines of high quality applicants flocking to their doors, have chosen to spend more money every year. “The objective of selective academic institutions” he contends, “is to be the best in every aspect of their activities.” As a result, they seek out all possible resources and “wind up in an arms race of spending to improve facilities, faculty, students, research, and instructional technology.” In “Over Invested and Over Priced,” Richard Vedder, director for the Center for College Affordability and Productivity and Professor of Economics at Ohio University, points out that this is due to the simple fact that colleges, as non-profits, have no bottom line. Under no pressure to be efficient, colleges often incur costs to buy things that improve magazine rankings, not knowing if this truly improves teaching or research. A report from the Goldwater Institute found that in 2007 it took 13.1 percent more employees to educate the same number of students than it did in 1993. Furthermore, the rate of increase of total university employees per students as greatest among private universities, which in 2007, had an average of 53.6 employees for ever 100 students, equivalent to fewer than two students per employee, an increase of 20 percent from 1993.

If the increased spending is going to enhance the quality of learning, one could argue that increased spending is well worth it. However, universities are not using their greater size and increased revenue to hire more teaching staff. In “Fall of the Faculty: The Rise of the All Administrative University and Why it Matters,” Benjamin Ginsberg, Professor Political Science at Johns Hopkins University, points out that the rise in college spending can be attributed almost entirely to the growth of administrations. He laments what he terms an “administrative blight” which is personified by what an army of “deanlets” and “deanlings”. Between 1975 and 2005, the growth in the ranks of administrators has far outstripped in the ranks of administrators has far outstripped the increase in faculty. The larger result of this, he contends, is that resources have been shifted to feed primarily the ever-increasing number of administrators who do little to advance the main instructional aims of a university. Indeed, between 1993 and 2007, inflation-adjusted spending on administration per student increased 61 percent while instructional spending per student rose only 39 percent during that same period.

Dartmouth has become the poster child for administrative bloat. In fact, Dartmouth spends more solely on administration per student that the average American university spends on everything per student. Information at The Center for COllege Affordability and Productivity shows that the large spending categories at Dartmouth are $37,000 per student for academic support, and $24,000 per student on research. Dartmouth is spending a staggering $88,000 per student before instructional costs are even considered.

Dartmouth currently has the highest tuition among the Ivies, and also has the dubious distinction of being a leader in splurging on administrative costs. Comparing Dartmouth’s 2013 Financial Report to Brown’s (the Ivy that is closest to us in size) is thought provoking. Brown and Dartmouth appear to have around the same number of total employees, despite the fact the Brown 36 percent more students! Brown pays its professors approximately 10 percent more per year than Dartmouth does, yet Brown’s total annual spending was somehow still a staggering $105,491,000 less than Dartmouth’s in 2013.

Digging into Dartmouth’s financial statements, one can discover that the university spent $326,856,000 on salaries and $112,937,000 on benefits in 2013, while Brown spent $294,674,000 on salaries and $94,185,000 on benefits. Overall Dartmouth spent a total of $86,715,000 more on compensation, or a difference of about 22 percent, despite the fact that they have about the same number of employees and that Dartmouth pays 10 percent less to Professors.

Furthermore, data from the Postsecondary Education Data System (IPEDS), reveals a disturbing trend for salaries of Dartmouth instructional employees (professors) versus non-instructional employees (administrative staff). The data indicate that from 2006 to 2007, salaries of Dartmouth professors actually dropped almost $40,000, while salaries for academic support employees (which includes Deans and other non-instructional functions), and salaries for institutional support (which includes employees not directly related to academics such as legal and fiscal managers) both have been increasing.

I was puzzled by this anomalous trend showing that salaries of professors had dramatically declined starting in 2007, while salaries of administrators dramatically increased at the same time. I contacted Dartmouth CFO, RIchard Mills, but he was not able to provide an explanation.

Dartmouth also appears to be more profligate with its endowment than Brown. Dartmouth’s 2013 Financial Report indicates that Dartmouth drew $183,816,000 from its endowment, giving it, on a per student basis, a little over $44,000 to work with, while Brown had about $23,000 per student. Dartmouth has been using vastly more of its endowment that Brown has. However, as these graphs indicate, Dartmouth’s spending does not seem to be going to increase the quality of the Dartmouth education, but rather seems to be mainly squandered on increased administrative salaries. In fact, further data from IPEDS indicates that Dartmouth spends a much smaller percentile of its budget on instruction than Brown does, and vastly more on academic support (a difference it shares with the rest of the Ivies as well).

While Dartmouth offers more generous financial aid than many colleges, it nonetheless still has the highest tuition cost of all the Ivies, and 50 percent of its students graduate with some amount of student debt. Nationwide, experts fear that a student debt bubble could endanger the economy. Many students have crushing levels of debt. There is a larger, more general question about how America as a society is allocating its resources. Perhaps the Ivy League colleges in particular need to take the lead in stopping the “arms race”, committing to not only containing, but actually reducing costs and tuition for the good of society as a whole.

This article is intended to be the first in a series exploring different aspects of financial management of Dartmouth and colleges in general. At an institute of higher learning where lucid and rigorous thinking is celebrated, it seems vitally important that the entire school community is concerned about how Dartmouth is managed.

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Emma Ractliffe is from St Aubin le Monial, France, and is studying Economics and Middle Eastern Studies. At Dartmouth she is President of the International Business Council, Chief Research Officer for Smart Women Securities, an Impact Analyst for Dartmouth Humanitarian Engineering, and an Editor for the Dartmouth Business Journal. During her free time, Emma enjoys playing tennis or squash and going hiking in the beautiful Appalachian Mountains.